Vertical Integration and International Predation

This paper investigates the interrelationship between a firm's incentive to engage in international predatory pricing and its domestic vertical industry ties in the context of the deep-pocket theory of predation. The deep pocket stems from a vertically integrated firm's ability to shift funds between its upstream and downstream divisions, enabling it to prey on vertically unintegrated upstream competitors. Vertical integration is shown to function as a cause of and a deterrent to foreign predatory behavior. Copyright 1996 by Blackwell Publishing Ltd.